American Express said it will cut 5,400 jobs, mostly from its travel business in an industry that the charge card giant said is being “reinvented as a result of the digital revolution” and the growing prevalence of mobile payments.
Despite taking $600 million in after-tax charges in the fourth quarter, the company said it made a net profit of $637 million, boosted by a card-spending jump of 8 percent compared to a year ago, even with the slowdown in the Northeast from Hurricane Sandy.
Overall, job reductions will be spread proportionally between the U.S. and international markets, and will primarily involve positions that do not directly generate revenue.
The company said it has to “adapt parts of the business as more customers transact online or through mobile channels, and provide the resources for additional growth initiatives in the U.S. and internationally.”
“Against the backdrop of an uneven economic recovery, these restructuring initiatives are designed to make American Express more nimble, more efficient and more effective in using our resources to drive growth,” said Kenneth I. Chenault, AmEx chairman and chief executive officer.
Total revenues rose 5 percent on the year to $8.1 billion.
American Express has been mired in card member reimbursements, partly as a result of consent orders with bank regulators and its own house cleaning. The company said its analyses of card-member inquiries, complaints and account records from the last several years have identified instances where:
- Late fees of approximately $28 million were collected from some card-members who did not receive statements for the billing period prior to the write-off of their accounts.
- Interest of approximately $24 million was charged to some card members who had disputed balances on their accounts.
- Certain bonus rewards for industry specific spending with an aggregate value of $68 million should have been credited to card members.
Separately, the company identified additional card members during the quarter who will receive restitution as part of the consent orders with various U.S. banking regulators in October. That restitution, which amounts to an incremental $33 million, relates to previously disclosed issues with debt collection settlement letters.